Rapid Offering for Contract Manufacturing
Different task owners of a company have to work together if an offer is to be prepared for a product (or service) manufactured exactly according to customer specifications:
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- Sales (direct customer advisor)
- development, possibly research (feasibility)
- Challenging production (cost) points (personnel and machine capacities), available capacity reserves
- Purchasing (procurement of critical materials, transportation costs to the customer)
- Controller (standard costing of the product or service, contribution margin targets)
The challenge for the company making the offer is, on the one hand, to have all internal data available for the potential business and, on the other hand, to be able to respond to the customer inquiry on time.
This requires being able to plan the potential order and also check the availability of personnel and machine capacities. It is also necessary to determine whether the raw material can be procured on time and whether any required semi-finished products will be available in inventory.
Plan and calculate the order in PPS before submitting the offer
For a customer-specific quotation, it is advisable to first enter the production order as a test in the PPS and to create a precalculation in management accounting. This is to clarify in advance whether the personnel and machine capacities will be available and whether the offer will generate sufficient contribution margin. PPS and precalculation are a central prerequisite for to quickly respond to customer inquiries. It must be possible to immediately retrieve or process all key influencing factors from the existing information system:
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- Customer data (address, contact person, order quantities, desired delivery dates, possibly qualitative specifications)
- Market data (competing suppliers and their strengths)
- Clarify technical manufacturability (development, possibly R&D)
- Article data (search for and adapt articles with similar bill of material)
- Work plan (processing steps and times per cost center/production center, setup, scrap rate, special tools if necessary)
- Availability of raw materials and semi-finished products (availability, replenishment time)
- Delivery times from suppliers
- Planned capacity utilization of production facilities, next free availabilities (can also refer to development), especially important if short and long production orders run on the same production facilities
- Proportional planned costs per unit for the requested product
- Contribution margin targets for the product or potential order
- Execution locks due to unpaid invoices (accounts receivable)
- New tools to be manufactured for the order, their delivery date and costs.
As this is an offer for a service not yet provided in this form or a customer-specific product, the data mentioned is required to create a preliminary cost estimate and determine the possible delivery date. A large part of the data and processing structures are already stored in the ERP. Access to the current ERP data is also important because other orders are implemented during the processing time of the offern and the free production capacities change as a result.
Quick Response Teams
In order to win the customer or the order, the offer must be submitted quickly. After all, the customer is waiting for the proposal so that he can also supply his own customers on time and as required.
To shorten the lead time when preparing an offer, it is suggested that “quick response teams” be set up (Daniel Moser, Wertfabrik). The team members should report directly to the team leader and have complete read and evaluation access to the above-mentioned databases. They work cross-functionally and, if the ERP-system and the management accounting-system are up to date, they can avoid or at least speed up coordination, calculate the offer and determine schedule availabilities. If quick response teams are to be formed in companies that receive inquiries from different customer groups or application areas, it may be advisable to set up several QR-teams.
As the capacity for core products is often used by several areas, the QR-teams’ read-only access to the company’s entire capacity requirements planning is particularly important.
Reducing lead times also has an impact on the financial result:
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- Less money is invested in the warehouses and, above all, in the average “work in progress” inventory. This reduces interest costs and the need for equity. As few orders in progress as possible should have to wait for the next processing step.
- Faster invoicing also leads to less need for credit and therefore lower interest costs.
The most important factor, however, is that the customer receives an offer sooner without false promises.